The worst Billion dollar Internet acquisitions

There were lots of bad acquisitions so it is hard to keep the list to just ten. But, here are my nominations for the worst Internet acquisitions of all time.  To get on my list the acquisition must be at least a Billion dollars, must have disappeared from view or lost the market share race, and must have been acquired at least 18 months ago. It takes a while to really know if an acquisition was a success or failure.

10. Mapquest - AOL acquired MapQuest for $1.1B in December of 1999. A nice service but worth $1.1B? I actually like MapQuest and it has decent market share but I couldn't find another billion dollar acquisition that looked worse. Any ideas?

9. Ask Jeeves – IAC/Interactive Corp acquires Ask Jeeves for $1.85 Billion in March 2005. Less than 4% market share and losing ground to Google. AskJeeves definitely has value but it is hard to justify the nearly $2B price tag.

8. Overture - Acquired by Yahoo for $1.6B in October 2003. Yahoo has spent the last year of so building "Panama" which will replace most of the Overture technology. There is some value left in Overture...but not much.

7. AltaVista - CMGI acquired a controlling stake in AltaVista from Compaq Computer for $2.3 Billion in June 1999. Later acquired by Overture for $140M.

6. GeoCities - acquired by Yahoo! in May 1999 for $3.56 billion

5. Netscape - acquired by AOL in November 1998 for $4.2 billion.

4. Broadcast.com - acquired by Yahoo! in July 1999 for $5.7 billion.

3. Excite - acquired by @Home in January 1999 for $6.7B

2. Lycos - acquired by Terra Networks for $12.5B in May 2000. Terra then sold Lycos to  Korean company just 4 years later for $95 million.

1. AOL - merged with TimeWarner in January 2000. AOL was valued at $160B. Today AOL is valued at about $20B, based on Google's investment of $1B for a 5% stake in AOL. Losing $140B of market value is really hard to do...almost unheard of. This is the number 1 worst Internet investment of all time.

Honorable mentions, but less than $1B;

Blue Mountain Cards $780M acquired by Excite

MySimon $700M acquired by C/Net

Too soon to tell;

Skype - acquired by eBay for $2.6B with performance bonuses that could push the total price to $4.1B. Huge price tag for a free VoIP service. My guess is that Skype will turn out to be a bad investment for eBay and eventually take a place on the Top 10 Worst Billion Dollar Internet Acquisitions.

YouTube - acquired by Google for $1.65B. Time will tell, but it looks very expensive right now.

MySpace - acquired by Fox Interactive for $580M. Too early to tell but this could turn out to be one of the BEST Internet acquisitions. A relatively low price for a really hot Internet property.

Tom O'Keefe maintains a pretty comprehensive list of Internet Acquisitions on the ResearchConnect.com site. I used this list in compiling my worst billion dollar acquisitions of all time.

What do you think? Are there other Billion dollar acquisition blunders? Would you rank them differently? Doesn't this make you wonder what happened to the executives that made these decisions? Only in America...

Comments

[Russ]

So I looked up $1bn + M&A in the last 3 years from Capital IQ (Software and Services Only). Comparing Mkt Value 90 days before acquisition, 90 days after, and change in mkt cap through today, the worst three acquisitions were:

Citigroup purchasing Citi Investor Services ($1.5bn, 75% decline in mkt cap)

CBS purchasing CNET ($1.8bn, 70% decline)

Citigroup purchasing Egg Banking Plc ($1.1bn, 67% decline...Citi, ouch!)

Microsoft purchasing Fast Search and Transfer ASA ($1.2bn, 37% decline)

The winner of the group:

Fidelity National Info Svcs acquiring Metavante ($4.9bn, 267% mkt cap increase since acquisition)

Now, you can't pin all the mkt cap decline on these acquisitions, however, they certainly didn't help. And yes, I'm a finance guy, which is why I must always nerd out with numbers.